US Airways Inc Retirement Income Plan for Pilots - Pension Benefit ...
US Airways Inc Retirement Income Plan for Pilots - Pension Benefit ...
US Airways Inc Retirement Income Plan for Pilots - Pension Benefit ...
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
.I<br />
The electronic data shows that <strong>US</strong> <strong>Airways</strong> paid L__ _____ __j three lump sums on<br />
July 15, 1998 from three different plans (see table below):<br />
Lump Sums Distributed to I<br />
I<br />
Pilo!s <strong>Plan</strong> $768,808.81<br />
Target <strong>Benefit</strong> <strong>Plan</strong> $99,842.86<br />
Top Hat <strong>Plan</strong> $104,252.53<br />
Total Lump Sums $972,904.20<br />
There is no record indicating that L__ _____ __jwas entitled to additional pension payments<br />
from any of these plans after July 15, 1998.<br />
The <strong>Pilots</strong> <strong>Plan</strong>'s <strong>for</strong>mer actuarial finn, Towers Perrin, provided PBGC with a document<br />
tit1ed "<strong>Pilots</strong> Minimwn Accrued <strong>Benefit</strong> as of January 1, 1998'' (Enclosure 4). 6 Although the<br />
original of this document contains infonnation <strong>for</strong> a number of pilots, we redacted the names of<br />
and in<strong>for</strong>mation <strong>for</strong> other pilots to grotect their privacy. Enclosure 4 lists the foliowing<br />
D<br />
in<strong>for</strong>mation <strong>for</strong> (l) accrued Minimum <strong>Benefit</strong> balance as of January I,<br />
1998 (as an annual amount); (2) the salaries used in computing his accrued Minimum <strong>Benefit</strong><br />
balance; and (3)0accrued benefit under the Basic Formula (as an annual amount).<br />
Finally, the records <strong>for</strong> show that [] began receiving a monthly<br />
benefit effective[] 1, 1998, and[]is currently receivinr a benefit from PBGC. For privacy<br />
protection reasons, we have not provided details concerning_ !benefit amounts<br />
in this decision.<br />
B. Relevant <strong>Plan</strong> Provisions<br />
The <strong>for</strong>mal <strong>Pilots</strong> <strong>Plan</strong> document in effect when retired in June 1998 is<br />
the <strong>Retirement</strong> <strong>Inc</strong>ome <strong>Plan</strong> <strong>for</strong> <strong>Pilots</strong> of <strong>US</strong>Air, <strong>Inc</strong>., as amended and restated effective<br />
7<br />
January 1, 1994 ("1994 <strong>Plan</strong>"). The 1994 <strong>Plan</strong> provisions relevant to the Appeal are provided in<br />
Enclosure 5 to this decision and are summarized below.<br />
The <strong>Pilots</strong> <strong>Plan</strong>'s Basic <strong>Benefit</strong> Formula. The 1994 <strong>Plan</strong>, at Section 4.1, establishes the<br />
following "Basic Formula":<br />
4.1 Basic Formula. The yearly amount of basic retirement income payable under the<br />
<strong>Plan</strong> to a Participant is equal to the sum of(A) and (B) less (C), ...<br />
It is the Appeals Board's understanding that this document is a printout of in<strong>for</strong>mation contained in electronic<br />
records.<br />
7<br />
The <strong>Pilots</strong> <strong>Plan</strong> document you provided as an exhibit to the Appeal is the <strong>Retirement</strong> Jncome <strong>Plan</strong> <strong>for</strong> <strong>Pilots</strong> of<br />
<strong>US</strong> <strong>Airways</strong>, <strong>Inc</strong>. (as amended and restated effective January l, 200 I) ("200 I <strong>Plan</strong>"). Although the 2001 <strong>Plan</strong> is<br />
similar to the 1994 <strong>Plan</strong> in many respects, the provisions in Section 7 titled "Maximum Defined <strong>Benefit</strong> Limitation"<br />
differ. See footnote 16 in the Appendix to this decision.<br />
5<br />
- ·-·----------·-·----
.I<br />
(A) 2.4% of the Participant's Final Average Earnings multiplied by the number of the<br />
Participant's full and partial years of Credited Service up to a maximum of25 years;<br />
(B) J% of the Participant's Final Average Earnings multiplied by the number of the<br />
Participant's full and partial years of Credited Service in excess of 25 years, up to a maximum of<br />
five years;<br />
(C) the yearly amount of retirement income payable to the Participant under the Target<br />
<strong>Benefit</strong> <strong>Plan</strong>; ...<br />
The Minimum <strong>Benefit</strong> Provision. Pages 29-30 of the Consolidated Decision (Enclosure<br />
1) provide a detailed explanation of the <strong>Pilots</strong> <strong>Plan</strong>'s Minimum <strong>Benefit</strong> provision. Section 4.1 (D)<br />
of the 1994 <strong>Plan</strong>, which is similar to the provisions in earlier and later <strong>Pilots</strong> <strong>Plan</strong> documents,<br />
provides the following Minimum <strong>Benefit</strong> <strong>for</strong> pilots who were on the Allegheny Airlines Systems<br />
Seniority List as of December 1, 1972:<br />
(D) The amount of retirement income that would be provided (if it were detennined<br />
without regard to any offset <strong>for</strong> benefits paid under the Target <strong>Benefit</strong> <strong>Plan</strong>) <strong>for</strong> a Participant who<br />
was on the Allegheny Airlines' System Seniority List as of December I, 1972 shall not be less<br />
than the amount to which D would have been entitled at his <strong>Benefit</strong> Commencement date or<br />
Termination of Employment had the <strong>Plan</strong> continued in effect without change on and after<br />
December 1, 1972 using actual Earnings and assuming, <strong>for</strong> the purposes of determining the<br />
retirement income to which the Participant would have been entitled under the Variable<br />
<strong>Retirement</strong> <strong>Inc</strong>ome <strong>Plan</strong>, as defined in the Prior <strong>Plan</strong>, that had the Variable <strong>Retirement</strong> <strong>Inc</strong>ome<br />
<strong>Plan</strong> remained in effect, the investment per<strong>for</strong>mance thereunder, would be equal to the investment<br />
perfonnance of the Standard and Poor's 500 stock index (unadjusted <strong>for</strong> dividends).<br />
Maximum Defined <strong>Benefit</strong> Limitation. Section 7.1 of the 1994 <strong>Plan</strong> states:<br />
7.1 Maximum Defined <strong>Benefit</strong> Limitation. As required by ERISA, the maximum<br />
amount of yearly retirement income which may be paid to a Participant under this <strong>Plan</strong> may not<br />
exceed the limitations contained in JRC § 41 S(b) of the Internal Revenue Code of 1986 taking into<br />
account the special rule contained in JRC § 415(b ){9) ....<br />
The <strong>Pilots</strong> <strong>Plan</strong>'s Lump Sum Option. The 1994 <strong>Plan</strong> permitted a participant with an<br />
employment tennination date on or after []Normal <strong>Retirement</strong> Date to elect to receive[]<br />
benefit in the <strong>for</strong>m of a 100% lump sum payment if the conditions (set out in section 10.4 of the<br />
1994 <strong>Plan</strong>) were met.<br />
C. <strong>Benefit</strong> Limitations under the Internal Revenue Code<br />
The IRC §' 415(b) limits. IRC § 415(a) generally provides that a trust which is part of a<br />
pension plan shall not constitute a qualified trust if "in the case of a defmed-benefit plan, the plan<br />
provides <strong>for</strong> the payment of benefits with respect to a participant which exceeds the limitation of<br />
subsection (b)." IRC § 41S(b), as in effect in 1998, provided that the hlghest annual benefit<br />
payable under a defined benefit plan was the lesser of $90,000 or l 00% of the participant's<br />
compensation.<br />
IRC § 41 S(d) further provides <strong>for</strong> "Cost-of-Living Adjustments" ("COLAs") to the<br />
415(b)(l )(A) amounts. The $90,000 amount cited above reflected a "base period" of the<br />
calendar quarter beginning October 1, 1986, and in years after 1986 that amount increased<br />
6